To provide a guarantee means to pledge to take responsibility when another person wants to borrow money or enter into an agreement where there’s a risk that they may not be able to pay back as agreed. By acting as a guarantor, you’re agreeing that if the borrower can’t pay, you as guarantor will. If you’re going to act as a guarantor, it’s important to have an agreement that protects you and your interests.

Types of guarantees

There are different types of guarantees that a guarantor can agree to:

• Simple guarantee
  With a simple guarantee, the guarantor becomes liable for payment only when it’s clear that the borrower can’t pay—for example, after the Swedish Enforcement Authority has attempted to collect without receiving full payment.
• Personal guarantee
  A personal guarantee means that the guarantor and the borrower are equally responsible for the debt. This allows the lender to demand payment directly from the guarantor if the borrower fails to pay. The lender doesn’t have to try to collect the debt from the borrower first.

When a guarantee is used

It’s possible to provide a guarantee when a lender wants to make sure that the borrower fulfills their obligations. Common examples include:

• Loans
  When an individual or a company takes out a loan—especially if they lack sufficient creditworthiness—the lender can require someone to act as a guarantor for the loan.
• Lease agreements
  When signing a lease, the landlord can require a guarantor for the tenant as security to make sure the rent will be paid.
• Business transactions
  In business contexts, guarantees are used to make sure that a business agreement or contract will be fulfilled.

The risks of providing a guarantee

Acting as a guarantor is a serious responsibility and can involve significant risks. If the borrower can’t pay, the guarantor becomes liable for the entire debt. This can, in turn, negatively affect the guarantor’s own finances. In the worst-case scenario, it may even lead to the guarantor falling into debt themselves. That’s why it’s crucial to carefully consider the risks before agreeing to act as a guarantor for someone else.

What we help with in guarantee matters

Legal advice
We provide guidance to help you understand what it means to act as a guarantor and the risks involved. We also assist you in evaluating whether it’s the right solution for you.

Drafting a guarantee agreement
Our lawyers will draft an agreement that protects your interests when providing a guarantee. We make sure the agreement is legally binding and meets all formal requirements.

Review of existing agreements
If you have already agreed to act as a guarantor or have a guarantee agreement in place, we can review the contract to make sure it’s correct and that you fully understand your obligations.

FAQ about guarantees

What happens if the borrower can’t pay?
If the borrower can’t pay, the guarantor becomes responsible for the debt. The lender can then demand payment directly from the guarantor.

Can I withdraw from a guarantee commitment?
It’s difficult to withdraw from a guarantee once the agreement has been signed. It usually requires the lender’s approval for you to be released, or that the entire debt is repaid.

What are the risks of acting as a guarantor?
The risk of providing a guarantee is that you become liable for the entire debt if the borrower can’t pay. This can, in turn, negatively affect your own finances and creditworthiness.